Which of the Following Represents a Common Reason for Increases

question 94

Multiple Choice

Which of the following represents a common reason for increases in net working capital with new projects?

• A) Inventory can now be held at lower levels.
• B) Accounts receivable are often not paid on time.
• C) Inventory increases more than accounts payable increase.
• D) Accounts payable must be increased.

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Definitions:

Profitability Index

A calculation used to assess the relative profitability of an investment, computed as the present value of future cash flows divided by the initial investment cost.

Present Value

The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Interest Rate

The percentage charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage of the principal.